Nonprofits Eligible for Forgivable Loans – CARES Act


by The Charity CFO

THE PASSING OF THE CARES ACT HAS NOW PROVIDED FUNDING RELIEF FOR SMALL BUSINESS AND NONPROFITS. HERE IS A BRIEF SUMMARY:

  • Nonprofits that have fewer than 500 employees an in operation on 2/15/2020 are eligible to apply.
  • Loan amounts is the lesser of $10M or 2.5x average monthly payroll expenses for the preceding 12 months.
  • Funds must be used for within the next 8 weeks: payroll, group health costs, interest payments on debt, rent, and utilities
  • Loan terms are 4% with 10 year maximum
  • NO COLLATERAL
  • NO PERSONAL GUARANTY
  • No payments are due for at least 6 months
  • Loans will be eligible for forgiveness.

HOW DO I KNOW IF I’M ELIGIBLE FOR FORGIVABLE LOANS?

What’s the catch? You must spend the money on eligible expenses. You must protect paychecks (keep your staff employed). You cannot get full forgiveness if you reduce FTEs or reduce compensation by 25% or more between now and June 30th.

HOW DO I APPLY FOR THE FORGIVABLE LOANS?

These loans will be processed through your local bank. If you have a banking relationship already, start there. Contacts we have had with the bank have said they expect the loans to be available around April 7th.

If you do not have your accounting in order or need help preparing the needed financial documents, let us know and we can help! You must be able to have a means to calculate payroll and other eligible expenses. You will also need a means to track these costs when you receive them in order to determine eligibility.

HOW MUCH CAN I APPLY FOR?

Loan amounts is the lesser of $10M or 2.5x average monthly payroll expenses for the preceding 12 months. You should run a calculation on your preceding 12 months payroll to compute an average monthly payroll. You can request essentially 2.5 months of payroll expenses. If you are a seasonable employer, you should compute average monthly payroll for March, April, May and June of 2019.

In addition to nonprofits eligible for forgivable loans, the nonprofit industry is seeking additional support and resources through philanthropy partners. Some nonprofits will be affected more than others. Here is another great article to consider your response to the challenges you are facing.